Less CVLs but compulsory liquidations and CVAs rise
The final month of a challenging year for many organisations hopefully brought a late upturn in business for them and allowed them to start 2025 on a more positive foot.
Continuing in this vein, the latest corporate insolvency figures released by The Insolvency Service for last month has shown a slight reduction in the headline rate but again has some interesting undercurrents and differences when it comes to the nations and the different procedures available.
The total number of company insolvencies in England and Wales in December 2024 was 1,838.
This was down 14% on the total from a year ago and was 6% lower than last month’s total of 1,966. Once again, the total is higher than any other corresponding November total from 2014-2019 and the Covid-19 era from 2020 to 2022.
Analysis
Of the 1,838 corporate insolvencies recorded in December, the most frequent kind were Creditors’ Voluntary Liquidations (CVLs) with 1,421.
This is a 8% decrease on the previous month’s total and is 22% lower than the same period from 12 months ago.
CVLs make up 77% of all corporate insolvencies recorded in December, a reduction of 2% from the ratio in November. CVLs have been increasing at a rate of approximately 10% a year between 2017 and 2019 before the pandemic and additional government measures arrested this growth.
There were a total of 273 compulsory liquidations recorded in December. This was an increase of 4% on last month’s total and a notable increase of 53% on the same period a year ago.
More directors are taking the initiative and closing their business if it is unviable or there is no clear way forward but for many others this decision is being taken out of their hands.
HMRC continues to crack down on companies with outstanding corporation tax, VAT, PAYE and National Insurance Contributions (NICs) with more staff being recruited and additional resources being allocated.
We should see the continued use of statutory demands and winding up petitions which should keep the number of compulsory liquidations relatively high.
There were 127 administrations in December which was a 5% decrease on the previous month’s total and a 5% increase on the number from December 2023. Administrations have now recovered to their pre-pandemic levels after falling to 18-year-lows during the Covid affected years.
17 Company Voluntary Arrangements (CVAs) were recorded in December which was a monthly increase of 21% and an annual increase of 13%.
CVAs had fallen to their lowest levels seen since 1993 but have recovered to approximately half of their pre-Covid totals.
Many directors are considering CVAs or administration procedures because of the additional options and legal protections granted to them that will enable them to reduce their debts and restructure their businesses and finances rather than go straight to a liquidation process.
There were no receivership appointments or restructuring plans registered in December.
Since June 2020, 59 companies have obtained an insolvency moratorium to pause legal actions from creditors while they are restructured and a further 35 companies had their restructuring plans registered at Companies House as required under the Corporate Insolvency and Governance Act 2020.
According to the rolling data from the Companies House register one in 189 companies (at a rate of 52.4 per 10,000) entered insolvency between 1 January 2024 and 30 December 2024. This was a slight decrease from the previous rolling 12 monthly total.
The Insolvency Service produces these 12-month rolling rates calculated as a proportion of the total number of active companies which they say highlights longer term trends and is designed to “tune out” any one-off or monthly volatility – although both monthly and rolling numbers have increased.
Scotland
In Scotland last month there were 82 company insolvencies – a decrease of 24% on the total from 12 months ago.
Last month’s total was made up of 27 compulsory liquidations (down from 54); 52 CVLs (down from 55) and three administrations (down from five). There were no CVAs or receivership appointments recorded.
Between 26 June 2020 and 31 December 2024 there were three restructuring plans recorded in Scotland and no insolvency moratoriums.
Traditionally Scotland has seen more compulsory liquidations than any other kind of insolvency process but CVLs overtook them in April 2020 and have remained higher ever since.
This shows that more Scottish directors and their accountants are taking the difficult decision early but retaining elements of control of the process rather than relying on creditors taking action and forcing the closure of their businesses.
The 12 month rolling insolvency rate for the effective register shows a rate of 51.9 companies per 10,000 entering insolvency in Scotland between 1 January and 30 December 2024. This was a decrease from the previous rolling 12 monthly total in November of 53.2.
Northern Ireland
In December, there were 23 company insolvencies in Northern Ireland. This was seven more than last month and 4% less than the same month in 2023.
The total number of company insolvencies was made up of four compulsory liquidations (up from three); 17 CVLs (up from 10); one CVA (down from two) and one administration (no change). There were no receivership appointments.
There was one moratorium in Northern Ireland between 26 June 2020 and 31 December 2024 and no restructuring plans.
The total insolvency rate in the 12 months up to and including December 2024 in Northern Ireland was 36.2 per 10,000 companies on the effective register. This was a slight reduction on the previous month but an increase of 6.8 on the same month a year previously.
The total number of company insolvencies for the whole of the UK in December was 1,943 – a monthly reduction of 153.
Chris Horner, Insolvency Director with BusinessRescueExpert, said: “The main change we’ve seen in the figures compared to last month is almost entirely a growth in compulsory liquidations and a reduction in CVLs.
“This indicates that while several directors were seizing the initiative and taking matters into their own hands regarding their agency when it comes to closing their business, several didn’t and left the decision to HMRC and other creditors instead.
“This removes the advantages they would have in a CVL in being able to choose an insolvency practitioner and also surrenders any influence over the timeline of the liquidation too.
“The number of CVAs rose slightly and while administrations were also down 5% month-on-month, they are still robust with many directors choosing to use the legal protections afforded to them by the process to help restructure and strengthen their businesses.
“Next month’s figures will give us an interesting snapshot of how companies are starting the year and could set a narrative depending on what they show.”
You don’t have to wait until next month for January’s insolvency statistics to be released if your business is facing some familiar financial challenges.
You can get in touch with us right now to arrange a free initial consultation to discuss what options you have available depending on your unique circumstances.
No matter what your aims and objectives are for 2025, these will become clearer after talking with one of our advisors – or even give you new options you hadn’t thought or didn’t realise were available.